[COMPANY LAW} PROMOTERS OF A COMPANY

Definition of Promoter: Anyone who undertakes to
take part in forming a company with reference to a given project and to set it
going and takes the necessary steps to accomplish that purpose or undertakes
raising capital for it, is deemed to be a promoter - provided that a
person acting in a professional capacity in the formation of the company is not
deemed to be a promoter (e.g. lawyers and accountants). (section
61) see Garba
versus Sheba Int. (Nig.) Ltd. [2002] 1NWLR (Pt.748) 372.He
would normally be the client who wants to form the company of which he may not
be a share holder or may play other roles e.g. help in getting Directors for
company - personality shopping etc. or entering into agreements on behalf of
the Company e.g. get office accommodation, factory sites, etc. or help in
getting the capital of the company by private placing of the shares of the
company etc.

Duties and Liabilities

(1) The promoter stand in a fiduciary
relationship to the company and must observe utmost good faith in transaction
entered on behalf of the company.

(2) The promoter must account for any profit made from
use of information on property acquired in the course of his duty to the
company.

(3) The transaction between the promoter and the
company can be rescinded by the company - except where after full disclosure by
the promoter, such transaction is ratified on behalf of the company by either
an independent board of directors (i.e. independent of the promoter) or a
general meeting at which such promoter cannot vote (section
62)

(4) There is no limitation period for company to sue
promoter under this section but the court may give relief from liability to the
promoter if it deems it equitable to do so.

Note: He is not entitled to remuneration
either for services rendered as a promoter or even for promotion expenses but
the Articles allow Directors to pay.

Every company shall have a common seal
the use of which shall be regulated by the Articles (section 74). Failure to use the common seal when
necessary renders the agreement ineffectual (African
Development Corp. Limited versus L.E.D.B. [1966] NCLR 438.If the company is permitted by its
objects to transact business in foreign countries it may, if authorized by its
Articles, have for use in any place outside Nigeria, an official seal which is
a facsimile of the common seal with the addition on its face of the name of
very country where it is to be used (section
75(1)).

A
company may, by writing under it its common seal, appoint an attorney either
generally or in a particular matter, to execute deeds on its behalf within or
outside Nigeria. A deed signed by such an attorney will bind the
company and have effect to the same extent as if it had been executed under the
common seal of the company (section
76).

Authentication and Service of
Documents

A document or proceeding required to be
authenticated by a company may be signed
by a Director, Secretary or other authorized officer of the company and need
not be under its common seal(section
77): A court process shall be served on a company in accordance with the
provisions of the applicable Rules of Court while any other document may be
served on a company by leaving it at, or sending it by post to the registered
office or head office of the company (section
78).

5:3 PRE-INCORPORATION
CONTRACTS

(1) Effect of
Pre-incorporation Contracts - The company can ratify after formation as if
it were in existence when the contract was entered into the company then
becomes bound and entitled to the benefits therein. Before such ratification, if there is no express agreement to the
contrary, the promoter will be personally liable and can benefit therefrom. (section
72)